Industry-driven aerospace partnership offers preliminary recommendations for enhancing sector competitiveness

The Canadian Aerospace Partnership (CAP) is weighing three sets of preliminary recommendations designed to increase the industry’s R&D intensity, establish a national technology network, increase Canadian industrial participation in major international projects and encourage government procurement. The initial aim of the multi-sectoral organization is to develop a 20-year vision for the aerospace industry that will inform and complement the aerospace strategic framework being developed within Industry Canada and championed by Industry minister David Emerson.

Formed last April, CAP has 29 members including 21 industry executives, Emerson and his provincial counterparts from Ontario, Quebec, British Columbia, Nova Scotia and Manitoba (see page 3). CAP held its third meeting September 7th and received reports and recommendations from three working groups (see chart on page 2).

If the initial recommendations make their way into policy, the industry could see substantial increases in government funding to bring Canada closer to support levels provided by other leading aerospace nations.

Canada’s aerospace industry is one of Canada’s industrial success stories ranking within the world’s top five. But its enviable track record could be jeopardized if no structural and funding changes are implemented. Lack of an overarching strategy has meant that success in securing portions of major international projects has been erratic. And investment in infrastructure and R&D upon which increased productivity and competitiveness rely is far below that of competing nations.

“Our past success in a rapidly change global marketplace does not guarantee future success, We are lagging in terms of investment recently and there’s concern that technological relevance and competitiveness over the long term are at risk,” says Peter Boag, president and CEO of the Aerospace Industries Association of Canada (AIAC). “We have an acute problem in mid-spectrum technology development and demonstration (and) federal R&D infrastructure is withering”.

To remedy the technology challenges facing the sector, CAP’s Technology Investment & Commercialization (TIC) working group will try to convince government and industry to increase R&D outlays to push Canadian aerospace R&D intensity from 5% to 10% over the next three years. If successful, aggregate R&D spending would increase from $1.2 billion in 2004 to more than $2.5 billion by 2007.

In both the US and Europe, however, approximately half of aerospace R&D costs are funded by government and are often provided in the form of grants. In Canada, government’s share is closer to 20%, placing greater onus on Ottawa and the provinces to substantially increase funding support.

“The aerospace sector gets a little more than $200 million a year from government and the sector needs $1 billion,” says Dr Hany Moustapha, a member of the TIC working group and senior fellow and director for technology and collaboration programs at Pratt & Whitney Canada. “We need a new structure and fund for technology research to increase R&D intensity. We need more government funding.”

In comparison, the US Department of Defense has an annual budget of US$70 billion for R&D and test and evaluation projects, much of which flows to the aerospace sector. While much of that spending is in areas where Canada has little presence — namely weapons systems and military aircraft — the amount dwarfs the Canadian public effort, even when differences in population and GDP are accounted for.

Boag agrees that increasing public aerospace R&D is an important objective of CAP, but he notes that it could be a combination of new and reallocated resources. He says a refocused Technology Partnerships Canada (TPC) program would help free up funding for mid-spectrum technology development, while a more targeted approach by granting agencies such as Science and Engineering Research Canada (NSERC) could also enhance industry competitiveness.

Perhaps more important is the role of the National Research Council’s Institute for Aerospace Research (IAR). The IAR has an annual budget of about $40 million but nearly half comes from industry, meaning researchers must sacrifice earlier-stage R&D in favour of more applied projects required by industry.

“There’s a view (within the TIC working group) that the government role needs to be strengthened. It’s a lot of money but it doesn’t necessarily have to be new money. The government could realign expenditures,” says Boag. “There could be a better focus at NSERC and we could also gain access to CFI (Canada Foundation for Innovation) funding to renew aerospace R&D infrastructure. We also need to move the IAR away from dependence on private sector funding . The institute is now being eviscerated.”

Boag says the planned creation of a separate fund for large aerospace projects is a welcome development as is the refocusing of TPC. But he adds that more work must be done on both concepts to ensure maximum effectiveness.

“Right now, TPC is the only government instrument for aerospace R&D funding but it’s like putting the square peg in the round hole. It can’t do everything, especially demonstration projects,” he says. “A restructured TPC is not the panacea.”

The TIC working group is also recommending the creation of a Canadian Aerospace Technology Network (CATN) as a key mechanism for doubling current R&D intensity and coordinating investments by the various sectors. Such a network has never been attempted nationally, but has been achieved in Quebec through the Consortium for Research and Innovation in Aerospace in Quebec (CRIAQ) (R$, February 11/02). (See story next page)

The CAP is also advocating an evaluation framework for major technology platforms to develop a consistent approach to Canadian participation and risk sharing in large international projects

“Companies have changed their business models,” says Boag. “We need a consistent approach with structured evaluation or we’ll lose market share ... It’ll improve the competitive position of companies for the future where it’s pay to play.”

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